BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 592|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 445-6614 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
VETO
Bill No: SB 592
Author: Morrow (R)
Amended: 5/28/99
Vote: 27 - Urgency
SENATE GOVERNMENTAL ORG. COMMITTEE : 11-0, 4/13/99
AYES: Baca, Chesbro, Dunn, Hughes, Johannessen, Karnette,
Knight, Lewis, O'Connell, Johnson, Perata
NOT VOTING: Burton
SENATE APPROPRIATIONS COMMITTEE : 11-1, 5/27/99
AYES: Alpert, Burton, Escutia, Johnson, Karnette, Kelley,
Leslie, McPherson, Mountjoy, Perata, Vasconcellos
NOES: Bowen
NOT VOTING: Johnston
SENATE FLOOR : 33-1, 6/3/99
AYES: Alarcon, Alpert, Baca, Bowen, Brulte, Burton, Costa,
Dunn, Escutia, Figueroa, Haynes, Hughes, Johannessen,
Johnson, Karnette, Kelley, Knight, Leslie, Lewis,
McPherson, Monteith, Morrow, Mountjoy, Murray, O'Connell,
Ortiz, Peace, Perata, Polanco, Poochigian, Rainey,
Vasconcellos, Wright
NOES: Speier
NOT VOTING: Chesbro, Hayden, Johnston, Schiff, Sher, Solis
ASSEMBLY FLOOR : 73-3, 9/7/99 - See last page for vote
SUBJECT : Horse racing: possessory interest tax offset
SOURCE : City of Del Mar
CONTINUED
SB 592
Page
2
DIGEST : This bill reimburses Del Mar horse racing
revenues lost as a result of a racing association's ability
to use those monies to pay possessory interest taxes.
Makes legislative findings and declarations.
ANALYSIS : Current law allows associations conducting a
horseracing meeting, and fairs that operate a satellite
wagering facility, to deduct an additional 0.33 of 1% from
the total parimutuel wagers placed within its inclosure or
at its satellite wagering facility.
The amounts deducted under these provisions will be
retained by the association or fair for the payment of
possessory interest taxes, if any, assessed against the
specified organization, racing association, or fair, and
after payment of these taxes will be distributed to the
city or county where the racing meeting or wagering is
conducted, at the option of the association or fair.
If a city or county has elected by ordinance to receive the
0.33% of 1% distribution under these provisions, (as the
City of Del Mar did in the above instance), it will not at
any time thereafter assess or collect any specified license
or excise tax or fee levied solely upon the racing
association or fair. The city or county electing to
receive these funds must provide all ordinary and
traditional municipal services, such as police services and
traffic control in connection with the racing meetings or
satellite wagering.
This bill:
1.Appropriates an unspecified amount of money from the
State General Fund to the Controller as described, in
order to reimburse cities in San Diego County for
revenues lost by the city due to 1995 legislation (AB 304
Tucker, Chapter 959, Statutes of 1995), that reduced the
city's share of horseracing revenues.
2.Specifies that the amount of reimbursement will be equal
to the total amount of possessory interest tax
reimbursement for which valid claims are submitted.
SB 592
Page
3
3.Declares that, due to unique circumstances pertaining to
cities in San Diego County that this bill is intended to
remedy, a general statute within the meaning of specified
provisions of the California Constitution cannot be made
applicable and a special statute is necessary.
Background
The author's office reports that under provisions of
existing law, the City of Del Mar elected to receive 0.33
of 1% from the Del Mar Thoroughbred Club (DMTC)
(approximately $300,000) in lieu of the city's right to tax
for providing traditional municipal services during their
racing meeting. However, the County of San Diego then
decided to impose a possessory interest tax on the DMTC,
thus creating the problem addressed in this bill.
Prior to 1990, the DMTC paid approximately $25,000 in
possessory interest taxes to the County of San Diego.
Following the completion of a new grandstand in 1993, the
County Assessor increased the tax to approximately
$600,000. Litigation with the County followed regarding
the payment of this tax by DMTC to the County. The court
ruled against DMTC, and a settlement was reached requiring
the DMTC to pay approximately $175,000 per year in
possessory interest tax to the County.
Prior Legislation
AB 304 (Tucker) Chapter 959, Statutes of 1995. Provided
that when a possessory interest tax is levied upon a
private horseracing association for the use of a publicly
owned fairground, the possessory interest taxes will be
deducted from the percentage of wagers allocated to local
governments.
AB 378 (Morrow) 1997-98 Session. Same legislation as this
bill. AB 378 passed the Senate Floor with a vote of 31-0.
The bill was vetoed by the Governor.
Votes for current members of the Senate who voted on AB 378
as an Assemblymember:
AYES: Baca, Escutia, Figueroa, Morrow, Murray, Ortiz,
SB 592
Page
4
Perata, Poochigian
NOES: Bowen
The Governor's veto message stated:
"This bill would require the Controller to refund, on
or before April 1, 1999, any amounts lost by cities for
possessory interest taxation during the 1997-98 fiscal
year due to the collection of in lieu fees from racing
associations.
"Existing law authorizes horse racing associations,
either though on-site or satellite wagering, to pay
one-third of 1% of their pari-mutuel wagers to local
governments in lieu of paying locally imposed license,
business or excise fees and taxes. Essentially, local
governments voluntarily accept racing association
revenues in lieu of receiving local taxes from the
racing associations. This law is intended to ensure
that all local taxes are waived when a city or county
accepts a percentage of the racing wagers.
"The City of Del Mar agreed to accept horse racing
wagers in lieu of taxing the racing association.
Subsequently, the county of San Diego levied a
possessory interest upon the association. Then, in
1995, AB 304 (Tucker, Ch. 959) was enacted to clarify
that when a possessory interest tax is levied upon a
private horse racing association for use of a publicly
owned fairground, the possessory interest taxes shall
be deducted from the percentage of wagers allocated to
local governments. While that measure results in a
significant loss of revenues for the City of Del Mar,
it maintains the original intent of the law that local
governments accept horse racing dollars in exchange for
not levying taxes."
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
Fiscal Impact (in thousands)
Major Provisions 1999-2000 2000-01
2001-02 Fund
SB 592
Page
5
Reimbursement 175 175
175 General
Current law requires each satellite wagering facility or
horse racing association to pay .0033 of their pari-mutuel
wagering revenues to the city in which the facility is
located. Current law also requires a private business
which owns structures on government-owned land to pay a
possessory interest tax on the value of the structures.
Legislation enacted in 1995 allowed satellite wagering
facilities and horse racing associations to pay their
possessory interest taxes from the .0033 wagering revenues.
Since possessory interest taxes are allocated in the same
manner as other property taxes, the county, schools, and
special districts receive a share of wagering revenues that
would otherwise be allocated entirely to the city in which
the racing facility was located.
This bill authorizes cities in San Diego County in which
horse racing associations or satellite wagering facilities
are located to file a claim with the Controller for an
amount equal to the possessory interest tax paid from the
.0033 wagering fee. Only the City of Del Mar meets these
criteria. In effect this claim amount would pay a city for
the watering revenue is lost due to the 1995 law.
SUPPORT : (Verified 5/28/99)
City of Del Mar (source)
ARGUMENTS IN SUPPORT : The sponsor of SB 592, the City of
Del, Mar states that AB 304 (Tucker) has resulted in the
City of Del Mar losing approximately 10% of its operating
budget each year. This legislation allows a serious
injustice to be corrected. Since Del Mar is the only site
in California where a private operator (Del Mar
Thoroughbred Club) operates horseracing facilities and
satellite wagering on a public facility (The Del Mar
Fairgrounds), the City of Del Mar (population 5,000) is the
only city affected by the loss of these revenues.
Enactment of this legislation would make the city budget
whole once again.
SB 592
Page
6
GOVERNOR'S VETO MESSAGE:
"This bill would require cities that submit a request
for possessory interest property tax reimbursement
for revenue losses resulting from Chapter 959,
Statutes of 1995, to be reimbursed from the General
fund. Chapter 959, in part, dealt with the
distribution of satellite wagering handle to cities
and counties.
"I am vetoing this bill because it would appropriate
approximately $175,000 from the General Fund to
reimburse eligible cities for their fee-revenue loss.
These costs to the General fund are not reflected in
the 1999 budget Act.
"In addition, this bill would grant ongoing fiscal
relief not usually provided and would create a
precedent for similar General Fund backfill for other
entities. Specifically, SB 592 appears premised on
the position that the state reimburses local agencies
for property tax revenue losses when possessory
interest tax exemptions are provided. However, that
analogy should not be used because possessory
interest exemptions typically are made with specific
provisions not to reimburse local agencies for those
losses. Therefore, the effect of this bill would be
to have the state reimburse a local agency for a
reduction in fee revenue."
ASSEMBLY FLOOR : 73-3, 9/7/99
AYES: Aanestad, Ackerman, Alquist, Aroner, Ashburn,
Baldwin, Bates, Battin, Baugh, Bock, Brewer, Briggs,
Calderon, Campbell, Cardenas, Cardoza, Cedillo, Corbett,
Correa, Cox, Cunneen, Davis, Dickerson, Ducheny, Dutra,
Firebaugh, Florez, Frusetta, Gallegos, Granlund,
Hertzberg, Honda, Jackson, Keeley, Knox, Kuehl, Leach,
Lempert, Leonard, Longville, Lowenthal, Machado, Maddox,
Maldonado, Margett, Mazzoni, Migden, Nakano, Olberg,
Oller, Robert Pacheco, Rod Pacheco, Papan, Pescetti,
Reyes, Romero, Runner, Scott, Shelley, Soto, Steinberg,
Strickland, Strom-Martin, Thomson, Torlakson, Vincent,
Washington, Wayne, Wiggins, Wildman, Wright, Zettel,
SB 592
Page
7
Villaraigosa
NOES: Havice, House, Thompson
NOT VOTING: Floyd, Kaloogian, McClintock, Wesson
TSM:cm 1/5/00 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****